Cenvat Credit Explained

03/04/2015 Cenvat Credit Explained

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Cenvat Credit Explained

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CENVAT CREDIT RULES (CCR), 2004Cenvat Credit Rules 2004 apply to whole of India except Jammu and Kashmir. Credit means claim of set-off of something paid earlier. Cenvat credit

means use of excise duty, service tax and custom duty (which is paid on input, input services and capital goods) paid earlier against service tax and

excise duty payable on rendering of services and clearance of manufacturing of goods.

CCR, 2004 deals with credit of service tax and excise duty. It means service tax and excise duty are interchangeable ie. to pay excise duty one can

use the input of service tax or input excise and vise versa.

Concept of availment and utilization:-Availment of input tax credit and utilization of accumulated tax credits are important aspects of the scheme. Many people feel that availment and

utilization is one and the same. However, both are different from each other as explained under:

Availment refers to assessee's entitlement to claim input tax credit.

Availment of input tax credit is a first stage of scheme.

Assessee is entitled to avail tax / duty credit on inputs, capital goods and input services used for providing taxable services or manufacture of

dutiable goods.

Utilization means use of Cenvat credit balance for payment of output tax such as excise duty, service tax, education cess etc.

Output tax liability can be discharged from accumulated Cenvat. There is no difference between physical cash payment and payment from

Cenvat account

RULE 2. Definitions:-In these rules, unless the context otherwise requires, -

(a) Capital Goods means:-

(A) the following goods, namely :-

all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling

under heading 6804 of the First Schedule to the Excise Tariff Act;

pollution control equipment;

components, spares and accessories of the goods specified at (i) and (ii);

moulds and dies, jigs and fixtures;

refractories and refractory materials;

tubes and pipes and fittings thereof

storage tank

motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers,used

-

(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or

(1A) outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory; or

(2) for providing output service;(B) motor vehicle designed for transportation of goods including their chassis registered in the name of the

service provider, when used for –

providing an output service of renting of such motor vehicle; or

transportation of inputs and capital goods used for providing an output service; or

providing an output service of courier agency;

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(C) motor vehicle designed to carry passengers including their chassis, registered in the name of the provider of service, when used for

providing output service of –

transportation of passengers; or

renting of such motor vehicle; or

imparting motor driving skills;

(D) components, spares and accessories of motor vehicles which are capital goods for the assessee;

(b) Customs Tariff Act means the Customs Tariff Act, 1975 (51 of 1975)

(c) Excise Act means the Central Excise Act, 1944 (1 of 1944);

(d) Exempted Goods means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are

chargeable to Nil rate of duty and goods in respect of which the benefit of an exemption under Notification No. 1/2011 or under entries at serial

numbers 67 and 128 of Notification No. 12/2012 is availed;

(e) Exempted Service means a:-

1. taxable service which is exempt from the whole of the service tax leviable thereon; or

2. service, on which no service tax is leviable under section 66B of the Finance Act; or

3. taxable service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable

service, shall be taken;

but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994.

(f) Excise Tariff Act means the Central Excise Tariff Act, 1985 (5 of 1986);

(g) Finance Act means the Finance Act, 1994 (32 of 1994);

(h) Final Products means excisable goods manufactured or produced from input, or using input service;

(i) First Stage Dealer means a dealer, who purchases the goods directly from,

the manufacturer under the cover of an invoice issued in terms of the provisions of Central Excise Rules, 2002 or from the depot of the said

manufacturer, or from premises of the consignment agent of the said manufacturer or from any other premises from where the goods are

sold by or on behalf of the said manufacturer, under cover of an invoice; or

an importer or from the depot of an importer or from the premises of the consignment agent of the importer, under cover of an invoice;

(k) Input means:-

(i) all goods used in the factory by the manufacturer of the final product; or

(ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods

used for providing free warranty for final products; or

(iii) all goods used for generation of electricity or steam for captive use; or

(iv) all goods used for providing any output service; but excludes

(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;

(B) any goods used for –

construction or execution of works contract of a building or a civil structure or a part thereof; or

laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a

works contract or construction service as listed under clause (b) of section 66E of the Act;

(C) capital goods except when used as parts or components in the manufacture of a final product;

(D) motor vehicles;

(E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such

goods are used primarily for personal use or consumption of any employee; and

(F) any goods which have no relationship whatsoever with the manufacture of a final product.

Explanation.- For the purpose of this clause, ―free warranty means a warranty provided by the manufacturer, the value of which is included in the price of the final product

and is not charged separately from the customer;

(l) Input Service means any service, –

used by a provider of output service for providing an output service;

used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up



to the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of

output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of

removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking,

credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward

transportation up to the place of removal;

but excludes:

(A) service portion in the execution of a works contract and construction services including service listed under;

clause

(b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for

(a) construction or execution of works contract of a building or a civil structure or a part thereof or

(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or

(B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods; or

(BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital

goods, except when used by: –

a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or

an insurance company in respect of a motor vehicle insured or reinsured by such person; or

such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club,

health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home

Travel Concession, when such services are used primarily for personal use or consumption of any employee;

(m) Input Service Distributor means an office of the manufacturer or producer of final products or provider of output service, which receives

invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be,

challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case

may be.

(n) Job Work means processing or working upon of raw material or semi finished goods supplied to the job worker, so as to complete a part or

whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the

expression job worker shall be construed accordingly;

(na) Large Tax Payer shall have the meaning assigned to it in the Central Excise Rules, 2002;

(naa) Manufacturer or Producer:-

(i) in relation to articles of jewellery or other articles of precious metals falling under Heading 7113 or 7114 as the case may be of the First Schedule

to the Excise Tariff Act, includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central

Excise Rules, 2002;

(ii) in relation to goods falling under Chapters 61, 62 or 63 of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of

excise leviable on such goods under sub-rule (1A) of rule 4 of the Central Excise Rules, 2002;

(o) Notification means the notification published in the Official Gazette;

(p) Output Service means any service provided by a provider of service located in the taxable territory but shall not include a service, –

1. specified in section 66D of the Finance Act; or

2. where the whole of service tax is liable to be paid by the recipient of service.

(q) Person liable for paying service tax has the meaning as assigned to it in clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994;

(r) Provider of taxable service include a person liable for paying service tax;

(s) Second Stage Dealer means a dealer who purchases the goods from a first stage dealer;

RULE 3(1):- CENVAT CREDIT (Eligible Duties for cenvat credit)A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT

credit) of

(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act(i.e. Basic Excise Duty)

Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods -

(a) In respect of which the benefit of an exemption under Notification No. 1/2011-C.E is availed; or



(b) Specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012 is availed;

(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act (i.e. Special Excise duty)

(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957

(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);

(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004

(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138

of the Finance Act, 2007

(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) ,

(vi) and (via);

Provided that CENVAT credit shall not be allowed in excess of 85% of the additional duty of customs paid under sub-section (1) of section 3 of the

Customs Tariff Act, on ships, boats and other floating structures for breaking up falling under tariff item 8908 00 00 of the First Schedule to the

Customs Tariff Act

(viia) the additional duty leviable under section3 (5) the Customs Tariff Act

Provided that a provider of output service shall not be eligible to take credit of such additional duty;

(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003

(ix) the service tax leviable under section 66 of the Finance Act

(ixa) the service tax leviable under section 66A of the Finance Act

(ixb) the service tax leviable under section 66B of the Finance Act

(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004

(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007

(xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 paid on –

(i) any input or capital goods received in the factory of manufacture of final product or by the provider of output service on or after the 10 day of

September, 2004; and

(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of

September,2004, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of

intermediate products, by a job worker availing the benefit of exemption specified in the notification No.214/86-Central Excise, and received by the

manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004.

Provided that the CENVAT credit shall be allowed to be taken of the amount equal to central excise duty paid on the capital goods at the time of

debonding of the unit in terms of the para 8 of Notification No. 22/2003.

Explanation- For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed

CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the

Customs Tariff Act.

Rule 3(2) :- Cenvat Credit where manufacture goods were initially exempted but later becomestaxableNotwithstanding anything contained in sub-rule (1), the manufacturer or producer of final products shall be allowed to take CENVAT credit of the duty

paid on inputs lying in stock or in process or inputs contained in the final products lying in stock on the date on which any goods

manufactured by the said manufacturer or producer cease to be exempted goods or any goods become excisable i.e. (duty paid on input lying in

stock as raw material ,as work in progress and as final product will be allowed for cenvat credit when goods become excisable.)

Rule 3(3) :-Cenvat Credit where service was initially exempted but later becomes taxableNotwithstanding anything contained in sub-rule (1), in relation to a service which ceases to be an exempted service, the provider of the output service

shall be allowed to take CENVAT credit of the duty paid on the inputs received on and after the 10th day of September, 2004 and lying in stock on

the date on which any service ceases to be an exempted service and used for providing such service (only input lying in raw material).

Rule 3(4) :- Manner in which cenvat credit may be utilizedThe CENVAT credit may be utilized for payment of –

(a) any duty of excise on any final product

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(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed

(c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such

(d) an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002

(e) service tax on any output service

Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is

available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter.

Provided further that CENVAT credit shall not be utilised for payment of any duty of excise on goods in respect of which the benefit of an

exemption under Notification No. 1/2011-C.E., is availed.

Provided also that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products

cleared after availing of the exemption under the following notifications :-

(i) No. 32/99-Central Excise, (ii) No. 33/99-Central Excise, (iii) No. 39/2001-Central Excise(iv) No. 56/2002-Central Excise (v) No. 57/2002-Central Excise

(vi) No. 56/2003-Central Excise (vii) No. 71/2003-Central Excise

shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is

availed of .

Provided also that no credit of the additional duty leviable under 3(5) of the Customs Tariff Act, shall be utilised for payment of service tax on any

output service.

Provided also that the CENVAT credit of any duty specified in sub-rule (1),except the National Calamity Contingent duty in item (v) thereof, shall not

be utilized for payment of the said National Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of

the First Schedule of the Central Excise Tariff.

Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Clean Energy Cess leviable under

section 83 of the Finance Act, 2010 because clean energy cess are paid in cash only.

Provided also that the CENVAT credit of any duty mentioned in sub-rule (1), other than credit of additional duty of excise leviable under section 85

of Finance Act, 2005, shall not be utilised for payment of said additional duty of excise on final products.

Explanation. - CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service

recipient. Service receiver under reverse charge mechanism is liable to pay service tax through cash and he can't utilize to cenvat credit to pay

service tax.

Rule 3(5):- Reversal of Cenvat credit where input or capital goods are removed as such in case ofmanufacturer or service providerWhen inputs or capital goods removed as such :-

1)Pay an amount equal to credit taken

2)such removal shall be made under an invoice referred in rule 9.

Exception:- means no payment of cenvat credit

1) in case of service provider, if inputs or capital goods are removed as such for providing output service. if inputs or capital goods are removed

other than the purpose of providing services then service provider is required to pay an amount equal to credit taken.

2) when any inputs are removed outside the factory for providing free warranty for final products.

Rule 3(5A):- Reversal of Cenvat credit where capital goods are removed after being used, ascapital goods or as waste or scrap in case of manufacturer or service providerIf the capital goods, on which CENVAT credit has been taken, are removed after being used, whether as capital goods or as scrap or waste, the

manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the

percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the

CENVAT Credit, namely : –

(a) for computers and computer peripherals:

for each quarter in the first year @ 10%

for each quarter in the second year @8%



for each quarter in the third year @ 5%

for each quarter in the fourth and fifth year @ 1%

(b) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be

equal to the duty leviable on transaction value.

Rule 3(5B):- Reversal of Cenvat credit where inputs or capital goods before being put to use arewritten off fully or partiallyIf the value of any,

(i) input, or

(ii) capital goods before being put to use,

on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the

books of accounts then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in

respect of the said input or capital goods.

Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of output services, the

manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid

earlier subject to the other provisions of these rules.

Issues clarified in circular no 907/27/2009:

If finished goods (in which input is contained ) are written off then also cenvat credit will be reversed unless the remission under rule 21 of central

Excise Rules, 2002 is granted because if remission is granted then reversal will be done under rule 3(5C).

If Work in progress(WIP) (in which input is contained ) are written off then check the stage of WIP:-if WIP has reached the stage as manufactured

goods then treatment will be done as finished goods. If activities carried out on WIP goods cannot be considered as amounting to manufacture in

that case goods will be considered as input and treatment will be done accordingly.

Explanation– If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), and (5B), it

shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.

Rule 3(5C):- Reversal of cenvat credit where remission of duty under rule 21 of Central ExciseRule, 2002 has been grantedWhere on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise

Rules, 2002, the CENVAT credit taken on the inputs used in the manufacture or production of said goods shall be reversed.

Rule 21 of the Central Excise Rules, 2002 provides that where it is shown to the satisfaction of commissioner to remit the duty,that:

goods have been lost or destroyed by natural causes or,

goods have been lost or destroyed by unavoidable accident or

the goods have become unfit for consumption or for marketing

at any time before removal, he may remit the duty payable on it subject to the condition as may be imposed by him.

Rule 3(6):- Cenvat credit will be allowed of amount paid under rule 3(5),3(5A):-The amount paid under sub-rule (5) and sub-rule (5A) shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such

goods under sub-rule (5) and sub-rule (5A).

Rule 3(7):- Restriction regarding utilization of cenvat credit:-Notwithstanding anything contained in sub-rule (1) and sub-rule (4), –

(a) CENVAT credit in respect of inputs or capital goods produced or manufactured by 100% export-oriented undertaking or by a unit in an Electronic

Hardware Technology Park or in a Software Technology Park other than a unit which pays excise duty levied under section 3 of the Excise Act and

used in the manufacture of the final products or in providing an output service, in any other place in India, in case the unit pays excise duty under

section 3 of the Excise Act shall be admissible equivalent to the amount calculated in the following manner, namely :-

Fifty per cent of X multiplied by {(l+BCD/100) multiplied by (CVD/100)}, where BCD and CVD denote ad valorem rates, in percent. of basic customs



duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value.

Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or

by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under

section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003 shall be equal to X multiplied by (1+BCD/200) multiplied by

(CVD/100).

Provided further that the CENVAT credit in respect of inputs and capital goods cleared on or after the 7th September, 2009 from an export-oriented

undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such undertaking

or unit has paid –

(A) excise duty leviable under section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003

(B) the Education Cess leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 and the Secondary and Higher Education Cess

leviable under section 136 read with section 138 of the Finance Act, 2007, on the excise duty referred to in (A),shall be the aggregate of –

(I) that portion of excise duty referred to in (A), as is equivalent to -

(i) the additional duty leviable under section 3(1) of the Customs Tariff Act, which is equal to the duty of excise under section 3 (1)(a)of the Excise

Act;

(ii) the additional duty leviable under section3 (5) the Customs Tariff Act; and

(II) the Education Cess and the Secondary and Higher Education Cess referred to in (B).

(b) CENVAT credit in respect of –

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978

(ii) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001

(iii) the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);

(iiia) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007

(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under items (i), (ii) and (iii) above;

(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003

(vi) the education cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (via) the Secondary and

Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 and

(vii) the additional duty of excise leviable under section 85 of the Finance Act, 2005, shall be utilised towards payment of duty of excise or as the

case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity

Contingent duty leviable under section 136 of the Finance Act, 2001 , or the education cess on excisable goods leviable under section 91 read with

section 93 of the said Finance (No. 2) Act, 2004, or the Secondary and Higher Education Cess on excisable goods leviable under section 136 read

with section 138 of the Finance Act, 2007 or the additional duty of excise leviable under section 157 of the Finance Act, 2003, or the education cess

on taxable services leviable under section 91 read with section 95 of the said Finance (No. 2) Act, 2004 , or the Secondary and Higher Education

Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 , or the additional duty of excise leviable under

section 85 of the Finance Act, 2005 respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs

themselves, if such inputs are removed as such or after being partially processed or on any output service.

Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of

the education cess on excisable goods or for the payment of theeducation cess on taxable services.

Provided further that the credit of the S. H. E.C. on excisable goods and the S.H.E.C. on taxable services can be utilized, either for payment of the

S.H.E.C.on excisable goods or for the payment of the S.H.E.C. on taxable services.

Explanation – For the removal of doubts, it is hereby declared that the credit of the additional duty of excise leviable under section 3 of the

Additional Duties of Excise (Goods of Special Importance) Act, 1957 paid on or after the 1 April, 2000, may be utilised towards payment of duty of

excise leviable under the First Schedule or the Second Schedule to the Excise Tariff Act.

(c) the CENVAT credit, in respect of additional duty leviable under section 3 of the Customs Tariff Act, paid on marble slabs or tiles falling under

tariff items 2515 12 20 and 2515 12 90 respectively of the First Schedule to the Excise Tariff Act shall be allowed to the extent of thirty rupees per

square metre.

Explanation - Where the provisions of any other rule or notification provide for grant of whole or part exemption on condition of non-availability of

credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail

over the provisions of these rules.

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RULE 4 :- Condition for booking/ allowing of Cenvat Creditfor taking the cenvat credit there is no need to be registered. This means if any duty has been paid before registration the credit of that duty can

also taken to pay output tax.

Rule 4(1):- Cenvat credit in respect of Inputsmay be taken Immediately on receipt of inputs in the factory of the manufacturer or in the premises of the service provider.

If goods (articles of jewellery or other articles of precious metals falling under Heading 7113 or 7114, as the case may be of the First Schedule to the

Excise Tariff Act,) are sent to job worker then credit of duty paid on inputs can be taken on receipts of final goods from the job worker. The only

condition is that such input is used by job worker in manufacturing of product.

Provided further that the CENVAT credit in respect of inputs may be taken by the provider of output service when the inputs are delivered to such

provider, subject to maintenance of documentary evidence of delivery and location of the inputs.

Rule 4(2):- Cenvat credit in respect of Capital Goodsmay be taken when goods are received in factory or in the premises of the provider of output service or outside the factory of the manufacturer of

the final products for generation of electricity for captive use within the factory.

Provided also that the CENVAT credit in respect of capital goods may be taken by the provider of output service when the capital goods are

delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the capital goods.

Capital goods

(a) 50% in Same Financial year inwhich Capital goods are received

(b) Balance in subsequent financial year( the conditionis that goods must be in possession)

Exception : means 100% in sameFinancial Year.

Exception : means without possession of goodscredit can also taken

1) if such capital goods are clearedas such in the same financial year

1)components, spares and accessories

2) additional duty leviable u/s3(5) ofCustom Tariff Act.

2) refractories and refractory materials

3)moulds and dies

4)goods falling under heading 6805(grinding wheelsand the like)

and parts thereof falling under heading 6804 of the

First Schedule to the Excise Tariff Act,

Rule 4(3):- Capital Goodsif capital goods are acquired by manufacturer or service provider on lease, hire purchase or loan agreement, from a financing company then also

Cenvat credit will be allowed.

Rule 4(4):- Capital Goodsthe cenvat credit will not be allowed in respect of that part of value of capital goods the duty on which has been claimed as depreciation u/s 32 of



Income Tax Act, 1961. This means either depreciation or cenvat credit of duty can be claimed both cannot be claimed.

Rule4(5)(a):-Cenvat Credit will be allowed if goods(input or capital goods) sent to job worker The CENVAT credit shall be allowed even if any inputs or capital

goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the

manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, with the condition that goods(inputs or

capital goods) should be received back within 180 days from the date of sending to job worker and if the inputs or the capital goods are not

received back within 180 days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to

the inputs or capital goods by debiting the CENVAT credit or otherwise(cash), but the CENVAT credit can be taken again when the inputs or capital

goods are received back in his factory or in the premises of the provider of output service .

This is exception of rule 3(5) which says that if inputs or capital goods are removed as such or after partial processing than cenvat credit on such

goods has to be paid or reversal of cenvat credit has to be done.

(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of final products to;-

(i) another manufacturer for the production of goods; or

(ii) a job worker for the production of goods on his behalf and according to his specifications.

The condition of 180 days does not apply in clause (b).

Rule4(6):-The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the

factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an

order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he

may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the

premises of the job-worker.

Rule4(7):- Input ServicesCredit of input service will be allowed on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is

received .

CENVAT credit in respect of an invoice, bill or, as the case may be, challan referred to in rule 9, issued before the 1st day of April, 2011 shall be

allowed, on or after the day on which payment is made.

In case of reverse charge mechanism where service receiver is liable to pay service tax, the cenvat credit will be available when payment is made of

value of input service and the service tax paid or payable.

If payment is not made within the 3 months of invoice or challan as case may be then Service Provider or manufacturer who has taken credit of

input service tax has to repay/ reverse equal amount of cenvat credit. Cenvat credit can be taken again when payment is made.

if any payment or part thereof, made towards an input service is refunded or a credit note is received by the manufacturer or the service provider

who has taken credit on such input service, he shall pay an amount (either debit cenvat credit or in cash) equal to the CENVAT credit availed in

respect of the amount so refunded or credited.

If the manufacturer of goods or the provider of output service fails to pay the amount of cenvat credit which was wrongly taken, it shall be

recovered, in the manner as provided in rule 14.

RULE 5:- Refund of CENVAT Credit(1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking,

or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as

determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification

in the Official Gazette.

Refund amount = (Export turnover of goods +Export turnover of services) ×Net cenvat credit/Total turnover

Where, –

1

1

2

2



(A) Refund amount: means the maximum refund that is admissible

(B) Net CENVAT credit: means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider

reduced by the amount reversed in terms of rule 3(5C) , during the relevant period;

(C) Export turnover of goods: means the value of final products and intermediate products cleared during the relevant period and exported

without payment of Central Excise duty under bond or letter of undertaking;

(D) Export turnover of services: means the value of the export service calculated in the following manner, namely:-

Export turnover of services = payments received during the relevant period for export services + export services whose provision has been

completed for which payment had been received in advance in any period prior to the relevant period – advances received for export services for

which the provision of service has not been completed during the relevant period

(E) Total turnover: means sum total of the value of -

(a) all excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported; (b) export

turnover of services determined in terms of clause (D) of sub-rule (1) above and the value of all other services, during the relevant period and (c) all

inputs removed as such under rule 3 (5) against an invoice, during the period for which the claim is filed.

(2) This rule shall apply to exports made on or after the 1st April, 2012.

Provided that the refund may be claimed under this rule, as existing, prior to the commencement of the CENVAT Credit (Third Amendment) Rules,

2012, within a period of one year from such commencement :

Provided further that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the

Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect

of such duty; or claims rebate of service tax under the Service Tax Rules, 1994 in respect of such tax.

Explanation 1.- For the purposes of this rule, –

(1) export service means a service which is provided as per rule 6A of the Service Tax Rules, 1994;

(2) relevant period means the period for which the claim is filed.

Explanation 2.- For the purposes of this rule, the value of services shall be determined in the same manner as the value for the purposes of sub-

rules (3) and (3A) of rule 6 is determined.

Rule 5A:- Refund of CENVAT credit to units in specified areasNotwithstanding anything contrary contained in these rules, where a manufacturer has cleared final products in terms of Notification No.20/2007

and is unable to utilize the CENVAT credit of duty taken on inputs required for manufacture of final products specified in the said notification, other

than final products which are exempt or subject to nil rate of duty, for payment of duties of excise on said final products ,then the Central

Government may allow the refund of such credit subject to such procedure, conditions and limitations, as may be specified by notification.

Explanation : For the purposes of this rule, duty means the duties specified in rule3(1) of these rules.

Rule 5B:-Refund of CENVAT credit to service providers providing services taxed on reverse charge basis A provider of service providing services notified

under section 68(2) of the Finance Act and being unable to utilise the CENVAT credit availed on inputs and input services for payment of service tax

on such output services, shall be allowed refund of such unutilised CENVAT credit subject to procedure, safeguards, conditions and limitations, as

may be specified by the Board by notification in the Official Gazette.

RULE 6:- Obligation of a manufacturer or producer of final products and a provider of output serviceRule 6(1) where inputs or inputs services are used, exclusively in exempted goods or exempted services:-

The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of

exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance up to the place of removal or

for provision of exempted services, except in the circumstances mentioned in sub-rule (2).

Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the

ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.



Rule 6(2):- where inputs or inputs services are used both in exempted and taxable goods or servicesWhere a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final

products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or

provider of output service shall maintain separate accounts for –

(a) the receipt, consumption and inventory of inputs used –

(i) in or in relation to the manufacture of exempted goods;

(ii) in or in relation to the manufacture of dutiable final products excluding exempted goods;

(iii) for the provision of exempted services;

(iv) for the provision of output services excluding exempted services; and

(b) the receipt and use of input services —

(i) in or in relation to the manufacture of exempted goods and their clearance up to the place of removal

(ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance up to the place of removal

(iii) for the provision of exempted services; and

(iv) for the provision of output services excluding exempted services, and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of

clause (a) and input services under sub-clauses (ii) and (iv) of clause (b) (in short cenvat credit will be taken only for the input which is used in

dutiable goods or taxable services.)

Rule 6(3) where inputs or inputs services are used both in exempted and taxable goods or services:- Notwithstanding anything contained in sub-

rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow any one of

the following options, as applicable to him, namely :-

(i) pay an amount equal to 6% of value of the exempted goods and exempted services; or

(ii) pay an amount as determined under sub-rule (3A); or

(iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit

only on inputs under sub-clauses (ii) and (iv) of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services.

The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of sub-rule (3A) shall not apply for such payment

Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i)

Provided further that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input

services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be 6% of the value so exempted.

Provided also that in case of transportation of goods or passengers by rail the amount required to be paid under clause (i) shall be an amount

equal to 2 % of value of the exempted services.

Explanation I - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such

option for all exempted goods manufactured by him or as the case may be, all exempted services provided by him, and such option shall not be

withdrawn during the remaining part of the financial year.

Explanation II - For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs used exclusively in or in relation to the

manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture

of exempted goods and their clearance up to the place of removal or for provision of exempted services.

Explanation III - No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.

Rule 6(3A):- Determination of amount payable under rule 6(3) (ii)For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service

shall follow the following procedure and conditions, namely :-

(a) While exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of

Central Excise giving the following particulars, namely :-

(i) Name, address and registration no. of the manufacturer of goods or provider of output service;

(ii) Date from which the option under this clause is exercised or proposed to be exercised;

(iii) Description of dutiable goods or output services;



(iv) Description of exempted goods or exempted services;

(v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(b) The manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month, –

(i) The amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A

(ii) The amount of CENVAT credit attributable to inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B

denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods

manufactured and removed plus the total value of output services provided plus the total value of exempted services provided, during the

preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A;

(iii) The amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance up to the place of

removal or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the

total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of output and exempted

services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes

total CENVAT credit taken on input services during the month;

(c) The manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted

goods and exempted services for the whole financial year in the following manner :-

(i) The amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of

inputs used in or in relation to manufacture of said exempted goods, denoted as H;

(ii) The amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total

value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the

total value of output services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT

credit taken on inputs during the financial year minus H;

(iii) The amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance up to the place of

removal or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value

of exempted goods manufactured and removed during the financial year, 1N denotes total value of output and exempted services provided, and

total value of dutiable and exempted goods manufactured and removed, during the financial year, and 1P denotes total CENVAT credit taken on

input services during the financial year;

(d) The manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount

determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding

financial year, where the amount determined as per condition (c) is more than the amount paid;

(e) The manufacturer of goods or the provider of output service, shall, in addition to the amount short paid, be liable to pay interest at the rate of

24% per cent p.a. from the due date, i.e., 30th June till the date of payment, where the amount short-paid is not paid within the said due date;

(f) Where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of

goods or the provider of output service may adjust the

excess amount on his own, by taking credit of such amount;

(g) The manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period

of 15 days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely :-

(i) Details of CENVAT credit attributable to exempted goods and exempted services, month wise, for the whole financial year, determined

provisionally as per condition (b),

(ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition(c),

(iii) Amount short paid determined as per condition (d), along with the date of payment of the amount short-paid,

(iv) Interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and

(v) Credit taken on account of excess payment, if any, determined as per condition (f);

(h) Where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as

prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no output service was provided in the preceding



financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally

for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in

condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year.

(i) Where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the

provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of 24% p.a. from the due date till the date of

payment.

Rule 6 (3B):- Notwithstanding anything contained in sub-rules (1), (2) and (3), a banking company and afinancial institution including a non-banking financial company, engaged in providing services by way ofextending deposits, loans or advances shall pay for every month an amount equal to 50% of theCENVAT credit availed on inputs and input services in that month.

Rule 6 (3D):- Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not takenfor the purpose of an exemption notification wherein any exemption is granted on the condition thatno CENVAT credit of inputs and input services shall be taken.Explanation I Value:- for the purpose of sub-rules (3) and (3A), —

(a) Shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made there under or, as the case may be, the

value determined under section 3, 4 or 4A of the Excise Act, read with rules made there under;

(b) In the case of a taxable service, when the option available under sub-rules (7), (7A), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been

availed, shall be the value on which the rate of service tax under section 66B of the Finance Act, read with an exemption notification, if any, relating

to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed;

(c) In case of trading, shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted

accounting principles without including the expenses incurred towards their purchase) or 10% of the cost of goods sold, whichever is more;

(d) In case of trading of securities, shall be the difference between the sale price and the purchase price of the securities traded or one per cent. of

the purchase price of the securities traded, whichever is more;

(e) Shall not include the value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of

interest or discount.

Explanation II - The amount mentioned in sub-rules (3), (3A) and (3B), unless specified otherwise, shall be paid by the manufacturer of goods or the

provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of

March, when such payment shall be made on or before the 31st day of the month of March.

Explanation III - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (3), (3A) and (3B), it

shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.

Explanation IV - In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a

service provider who is an individual or proprietary firm or partnership firm, the expressions, following month and month of March occurring in

sub-rules (3) and (3A) shall be read respectively as following quarter and quarter ending with the month of March.

Rule 6(4):- No CENVAT credit shall be allowed on capital goods if used exclusively in exempted goodsor in exempted servicesNo CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted

services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where

exemption is granted based upon the value or quantity of clearances made in a financial year.

Rule 6 (6):- Applicable where goods are removed to specified unitsThe provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either –

(i) Cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations; or

(ii) Cleared to a 100% export-oriented undertaking; or

(iii) Cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or



(iv) Supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which

exemption of duty is available under notification No. 108/95

(iva) Supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the

provisions of Notification No. 12/2012

(v) Cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or

(vi) Gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or

(vii) All goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional

duty leviable under section 3(1) of Customs Tariff Act when imported into India and are supplied, —

(a) Against International Competitive Bidding; or

(b) To a power project from which power supply has been tied up through tariff based competitive bidding; or

(c) To a power project awarded to a developer through tariff based competitive bidding, in terms of Notification No. 12/2012

(viii) Supplies made for setting up of solar power generation projects or facilities.

Rule 6 (7):- Applicable where services are provided to specified unitsThe provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a

unit in a Special Economic Zone or to a developer of a Special Economic Zone for their authorised operations or when a service is exported.

Rule 6 (8):- For the purpose of this rule, a service provided or agreed to be provided shall not be anexempted service when:-(a) the service satisfies the conditions specified under rule 6A of the Service Tax Rules, 1994 and the payment for the service is to be received in

convertible foreign currency; and

(b) such payment has not been received for a period of six months or such extended period as maybe allowed from time-to-time by the Reserve

Bank of India, from the date of provision.

RULE 7:- Manner of distribution of credit by Input Service Distributor (ISD)ISD may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output

service, subject to the following conditions, namely :—

(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon

(b) credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted

services shall not be distributed

(c) credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit;

(d) credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the

relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates during the same period.

Explanation 1 For the purposes of this rule, ―unit includes the premises of a provider of output service and the premises of a manufacturer

including the factory, whether registered or otherwise.

Explanation 2 For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5.

Explanation 3 (a) The relevant period shall be the month previous to the month during which the CENVAT credit is distributed.

(b) In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules, 1994 or rule 8 of Central Excise Rules, 2002

then the relevant period shall be the quarter previous to the quarter during which the CENVAT credit is distributed.

(c) In case of an assessee who does not have any total turnover in the said period, the input service distributor shall distribute any credit only after

the end of such relevant period wherein the total turnover of its units is available.

Rule 7A:- Distribution of credit on inputs by the office or any other premises of output service



provider(1) A provider of output service shall be allowed to take credit on inputs and capital goods received, on the basis of an invoice or a bill or a challan

issued by an office or premises of the said provider of output service, which receives invoices, issued in terms of the provisions of the Central

Excise Rules, 2002, towards the purchase of inputs and capital goods.

(2) The provisions of these rules or any other rules made under the Central Excise Act, 1944, as made applicable to a first stage dealer or a second

stage dealer, shall mutatis mutandis apply to such office or premises of the provider of output service.

RULE 8:- Storage of input outside the factory of the manufacturerThe Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the

factory of a manufacturer of the final products may, in exceptional circumstances having regard to the nature of the goods and shortage of

storage space at the premises of such manufacturer, by an order, permit such manufacturer to store the input in respect of which CENVAT credit

has been taken, outside such factory, subject to such limitations and conditions as he may specify.

Provided that where such input is not used in the manner specified in these rules for any reason whatsoever, the manufacturer of the final

products shall pay an amount equal to the credit availed in respect of such input.

RULE 9:- Documents and Accounts

Rule 9(1):- cenvat credit will be allowed on the basis of following documentsThe CENVAT credit shall be taken by the manufacturer or the provider of output service or ISD, as the case may be, on the basis of any of the

following documents, namely :-

(a) An invoice issued by:-

(i) A manufacturer for clearance of:-

inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other

premises from where the goods are sold by or on behalf of the said manufacturer

inputs or capital goods as such;

(ii) An importer:-

An importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may

be, is registered in terms of the provisions of Central Excise Rules, 2002;

(iii) A first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or

(b) A supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules,

2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises

from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty

leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the

manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful mis-

statement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made

there under with intent to evade payment of duty.

Explanation. - For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing

payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act; or

(bb) A supplementary invoice, bill or challan issued by a provider of output service, in terms of the provisions of Service Tax Rules, 1994 except

where the additional amount of tax became recoverable from the provider of service on account of non-levy or non-payment or short-levy or short-

payment by reason of fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of the Finance

Act or of the rules made there under with the intent to evade payment of service tax;

(c) A bill of entry; or



(d) A certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office

(e) A challan evidencing payment of service tax, by the service recipient as the person liable to pay service tax

(f) An invoice, a bill or challan issued by a provider of input service on or after the 10th Sept, 2004

(g) An invoice, bill or challan issued by an ISD under rule 4A of the Service Tax Rules, 1994

Provided that the credit of additional duty of customs levied under section3 (5) of the Customs Tariff Act, 1975 shall not be allowed if the invoice or

the supplementary invoice, as the case may be, bears an indication to the effect that no credit of the said additional duty shall be admissible.

Rule 9(2):- Cenvat credit will be allowed if relevant information are contained in documentsNo CENVAT credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax

Rules, 1994, as the case may be, are contained in the said document :

Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the

goods or taxable service, assessable value, Central Excise or Service tax registration number of the person issuing the invoice, as the case may be,

name and address of the factory or warehouse or premises of first or second stage dealers or provider of output service, and the Deputy

Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered

by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit.

Rule9(4):- Cenvat credit will be allowed if relevant records maintained by First Stage Dealer orSecond Stage DealerThe CENVAT credit in respect of input or capital goods purchased from a FSD or SSD shall be allowed only if such FSD or SSD, as the case may be,

has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid by the producer of

such input or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him.

Rule9(5):- Maintainece of proper record of inputs or capital goods for claiming cenvat creditThe manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and

inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the

person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT

credit shall lie upon the manufacturer or provider of output service taking such credit.

Rule 9(6):- Maintainece of proper record of input for claiming cenvat creditThe manufacturer of final products or the provider of output service shall maintain proper records for the receipt and consumption of the input

services in which the relevant information regarding the value, tax paid, CENVAT credit taken and utilized, the person from whom the input service

has been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or

provider of output service taking such credit.

Rule 9(7):- Return of Cenvat credit in case of manufactureThe manufacturer of final products shall submit within 10 days from the close of each month to the Superintendent of Central Excise, a monthly

return in the form specified, by notification, by the Board

Provided that where a manufacturer is availing exemption under a notification based on the value or quantity of clearances in a financial year(SSP),

he shall file a quarterly return in the form specified, by notification, by the Board within 10 days after the close of the quarter to which the return

relates.

Rule 9(8):- Return of Cenvat credit in case of FSD or SSDA FSD or SSD, as the case may be, shall submit within 15 days from the close of each quarter of a year to the Superintendent of Central Excise, an

electronic return in the form specified, by notification, by the Board.

Rule 9(9):- Return of Cenvat credit in case of Service providerThe provider of output service availing CENVAT credit, shall submit a half yearly return in form specified, by notification, by the Board to the

Superintendent of Central Excise, by the end of the month following the particular quarter or half year.



Rule 9(10):- Return of Cenvat credit in case of ISDThe input service distributor(ISD), shall furnish a half yearly return in such form as may be specified, by notification, by the Board, giving the

details of credit received and distributed during the said half year to the jurisdictional Superintendent of Central Excise, not later than the last

day of the month following the half year period.

Rule 9(11):- Revised return in case of service provider or ISDThe provider of output service, availing CENVAT credit referred to in sub-rule (9) or the input service distributor (ISD) referred to in sub-rule (10), as

the case may be, may submit a revised return to correct a mistake or omission within a period of 60 days from the date of submission of the

return under sub-rule (9) or sub-rule (10), as the case may be.

Rule 9A:- Information relating to principal inputs by manufacturer(1) A manufacturer of final products shall furnish to the Superintendent of Central Excise, annually by 30th April of each Financial Year, a

declaration in the Form specified in respect of each of the excisable goods manufactured or to be manufactured by him, the principal inputs and

the quantity of such principal inputs required for use in the manufacture of unit quantity of such final products.

Provided that for the year 2004-05, such information shall be furnished latest by 31st December, 2004.

(2) If any alteration in the information so furnished under sub-rule (1), he shall furnish information to the Superintendent of Central Excise

together with the reasons for such alteration before the proposed change or within 15 days of such change in the Form specified by the Board

under sub-rule (1).

(3) A manufacturer of final products shall submit, within 10 days from the close of each month, to the Superintendent of Central Excise, a

monthly return in the Form specified, by a notification, by the Board, in respect of information regarding the receipt and consumption of

each principal inputs with reference to the quantity of final products manufactured by him

(4) The Central Government may, by notification and subject to such conditions or limitations, as may be specified in such notification, specify

manufacturers or class of manufacturers who may not be required to furnish declaration mentioned in sub-rule (1) or monthly return mentioned in

sub-rule(3).

(5) Every assessee shall file electronically, the declaration or the return, as the case may be, specified in this rule.

Explanation For the purposes of this rule, principal inputs, means any input which is used in the manufacture of final products where the cost of

such input constitutes not less than 10% of the total cost of raw materials for the manufacture of unit quantity of a given final products.

RULE 10:- Transfer of CENVAT credit(1) If a manufacturer of the final products shifts his factory

to another site or

the factory is transferred on account of change in ownership or

on account of sale, merger, amalgamation, lease or

transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory,

then, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased

or amalgamated factory.

(2) If a provider of output service shifts or transfers his business

on account of change in ownership or

on account of sale, merger, amalgamation, lease or

transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business,

then, the provider of output service shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold,

merged, leased or amalgamated business.

(3) The transfer of the CENVAT credit under sub-rules (1) and (2) shall be allowed only if the stock of inputs as such or in process, or the capital

goods is also transferred along with the factory or business premises to the new site or ownership and the inputs, or capital goods, on which credit

has been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise or, as the case may be, the Assistant

Commissioner of Central Excise.



Rule 10A:- Transfer of CENVAT credit of additional duty leviable under section 3(5) of the CustomsTariff Act(1) A manufacturer or producer of final products, having more than one registered premises, for each of which registration under the Central Excise

Rules, 2002 has been obtained on the basis of a common Permanent Account Number under the Income-tax Act, 1961, may transfer unutilized

CENVAT credit of additional duty leviable under section 3(5) of the Customs Tariff Act, lying in balance with one of his registered premises at the

end of a quarter, to his other registered premises by—

(i) making an entry for such transfer in the documents maintained under rule 9;

(ii) issuing a transfer challan containing registration number, name and address of the registered premises transferring the credit and receiving

such credit, the amount of credit transferred and the particulars of such entry as mentioned in clause (i),and such recipient premises may take

CENVAT credit on the basis of the transfer challan

Provided that nothing contained in this sub-rule shall apply if the transferring and recipient registered premises are availing the benefit of the

following notifications of the Government of India in the Ministry of Finance (Department of Revenue), namely :-

(i) No. 32/99-Central Excise, (ii) No. 33/99-Central Excise, (iii) No. 39/2001-Central Excise (iv) No. 56/2002-Central Excise, (v) No. 57/2002-Central

Excise, (vi) No. 56/2003-Central Excise, (vii) No.71/2003-Central Excise, (viii) No. 20/2007-Central Excise, (ix) No. 1/2010-Central Excise,

(2) The manufacturer or producer shall submit the monthly return, as specified under these rules, separately in respect of transferring and

recipient registered premises.

RULE 11:- Transitional provision(1) in case of manufacturer or service provider any amount of cenvat credit is existed under the CCR, 2002 or the Service Tax Credit Rules, 2002

prior to the 10th day of Sept, 2004 and remaining unutilized on that day shall be allowed as CENVAT credit to such manufacturer or provider of

output service under these rules, and be allowed to be utilized in accordance with these rules.

(2) A manufacturer who opts for exemption of SSI and there is CENVAT credit on inputs or input services before such option is exercised, shall be

required to pay an amount equivalent to the CENVAT credit, if any, allowed to him in respect of inputs lying in stock or in process or contained in

final products lying in stock on the date when such option is exercised and after deducting the said amount from the balance, if any, lying in his

credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether

cleared for home consumption or for export (means no need to reversal of cenvat credit on capital goods )

(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in

respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product

lying in stock, if, –

(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification

issued under section 5A of the Act; or

(ii) the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of

CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on

any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether

provided in India or exported.

(4) A provider of output service shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs

received for providing the said service and is lying in stock or is contained in the taxable service pending to be provided, when he opts for

exemption from payment of whole of the service tax leviable on such taxable service under a notification issued under section 93 of the Finance

Act, 1994 and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall

lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export or

for payment of service tax on any other output service, whether provided in India or exported.

RULE 12:- Special dispensation in respect of inputs manufactured in factories located in specifiedareas of North East region, Kutch district of Gujarat, State of J and K and State of SikkimNotwithstanding anything contained in these rules, but subject to the proviso to Rule 3(1)(i), where a manufacturer has cleared any inputs or capital

goods, in terms of notifications No. 32/99 or No. 33/99, or No. 39/2001or notification No. 56/2002or No. 57/2002, or notification No. 56/2003or



71/2003or No. 20/2007the CENVAT credit on such inputs or capital goods shall be admissible as if no portion of the duty paid on such inputs or

capital goods was exempted under any of the said notifications (means full cenvat credit allowed).

Rule 12A:- Procedure and facilities for large tax payer(LTP)Notwithstanding anything contained in these rules, the following procedure shall apply to a LTP -

(1) A LTP may remove

inputs, except motor spirit, commonly known as petrol, high speed diesel and light diesel oil or

capital goods,

as such, on which CENVAT credit has been taken, without payment of an amount specified in Rule 3(5) of CCR2004, under the cover of a transfer

challan or invoice, from any of his registered premises (hereinafter referred to as the sender premises) to his other registered premises, other than

a premises of a FSD or SSD (hereinafter referred to as the recipient premises), for further use in the manufacture or production of final products in

recipient premises subject to condition that –

(a) the final products are manufactured or produced using the said inputs and cleared on payment of appropriate duties of excise leviable thereon

within a period of 6 months, from the date of receipt of the inputs in the recipient premises; or

(b) the final products are manufactured or produced using the said inputs and exported out of India, under bond or letter of undertaking within a

period of six months, from the date of receipt of the input goods in the recipient premises, and that any other conditions prescribed by the

Commissioner of Central Excise, Large Tax payer Unit in this regard are satisfied.

Explanation 1 The transfer challan or invoice shall be serially numbered and shall contain the registration number, name, address of the large tax

payer, description, classification, time and date of removal, mode of transport and vehicle registration number, quantity of the goods and

registration number and name of the consignee

Provided that if the final products manufactured or produced using the said inputs are not cleared on payment of appropriate duties of excise

leviable thereon or are not exported out of India within the said period of 6 months from the date of receipt of the input goods in the recipient

premises, or such inputs are cleared as such from the recipient premises, an amount equal to the credit taken in respect of such inputs by the

sender premises shall be paid by the recipient premises with interest in the manner and rate specified under rule 14 of these rules.

Provided further that if such capital goods are used exclusively in the manufacture of exempted goods, or such capital goods are cleared as such

from the recipient premises, an amount equal to the credit taken in respect of such capital goods by the sender premises shall be paid by the

recipient premises with interest in the manner and rate specified under rule 14 of these rules.

Explanation 2 If a large tax payer fails to pay any amount due in terms of the first and second provisos, it shall be recovered along with interest in

the manner as provided under rule 14 of these rules

Provided also that nothing contained in this sub-rule shall be applicable if the recipient premises is availing following notifications (i) No. 32/99 (ii)

No. 33/99 (iii) No. 39/2001 (iv) No. 56/2002 (v) No. 57/2002 (vi) No. 56/2003 (vii) No. 71/2003 (viii) No. 20/2007 (ix) No. 1/2010

Provided also that nothing contained in this sub-rule shall be applicable to an export-oriented unit or a unit located in a Electronic Hardware

Technology Park or Software Technology Park.

(2) The first recipient premises may take CENVAT credit of the amount paid under first proviso to sub-rule (1) as if it was a duty paid by the sender

premises who removed such goods on the basis of a document showing payment of such duties.

(3) CENVAT credit of the specified duties taken by a sender premises shall not be denied or varied in respect of any inputs or capital goods, –

(a) removed as such under sub-rule (1) on the ground that the said inputs or the capital goods have been removed without payment of an amount

specified in rule3(5) of these rules; or

(b) on the ground that the said inputs or capital goods have been used in the manufacture of any intermediate goods removed without payment of

duty under rule 12BB (1) of Central Excise Rules, 2002.

Explanation For the purpose of this sub-rule ―intermediate goods shall have the same meaning assigned to it in rule 12BB(1) of the Central Excise

Rules, 2002.

(4) A large tax payer may transfer, CENVAT credit available with one of his registered manufacturing premises or premises providing taxable service

to his other such registered premises by, -

(i) making an entry for such transfer in the record maintained under rule 9;

(ii) issuing a transfer challan containing registration number, name and address of the registered premises transferring the credit as well as

receiving such credit, the amount of credit transferred and the particulars of such entry as mentioned in clause



(i), and such recipient premises can take CENVAT credit on the basis of such transfer challan as mentioned in clause

(ii) Provided that such transfer or utilisation of CENVAT credit shall be subject to the limitations prescribed under rule3

(b) Provided further that nothing contained in this sub-rule shall be applicable if the registered manufacturing premises is availing following

notifications (i) No. 32/99 (ii) No. 33/99 (iii) No. 39/2001(iv) No. 56/2002 (v) No. 57/2002(vi) No. 56/2003 (vii) No. 71/2003 (viii) No. 20/2007 (ix) No.

1/2010.

(5) A large tax payer shall submit a monthly return, as prescribed under these rules, for each of the registered premises.

(6) Any notice issued but not adjudged by any of the Central Excise Officer administering the Act or rules made there under immediately before the

date of grant of acceptance by the Chief Commissioner of Central Excise, Large Tax payer Unit, shall be deemed to have been issued by Central

Excise officers of the said Unit.

(7) Provisions of these rules, insofar as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large tax

payer.

Rule 12AAA:- Power to impose restrictions in certain types of casesNotwithstanding anything contained in these rules, where the C.G. in order to prevent the misuse of the provisions of CENVAT credit as specified in

these rules, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, FSD or SSD or an

exporter, may by a notification in the Official Gazette, specify nature of restrictions including restrictions on utilization of CENVAT credit and

suspension of registration in case of a dealer and type of facilities to be withdrawn and procedure for issue of such order by an officer authorized

by the Board.

RULE 13:- Power of Central Government to notify goods for deemed CENVAT creditNotwithstanding anything contained in rule 3, the Central Government may, by notification, declare the input or input service on which the duties

of excise, or additional duty of customs or service tax paid, shall be deemed to have been paid at such rate or equivalent to such amount as may be

specified in that notification and allow CENVAT credit of such duty or tax deemed to have been paid in such manner and subject to such conditions

as may be specified in that notification even if, in the case of input, the declared input, or in the case of input service, the declared input service, as

the case may be, is not used directly by the manufacturer of final products, or as the case may be, by the provider of output service, declared in

that notification, but contained in the said final products, or as the case may be, used in providing the output service.

RULE 14:- Recovery of CENVAT credit wrongly taken or erroneously refundedWhere the CENVAT credit has been taken and utilised wrongly or has been erroneously refunded, the same along with interest shall be recovered

from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AA of the Excise Act or sections 73 and 75 of

the Finance Act, shall apply mutatis mutandis for effecting such recoveries.

RULE 15:- Confiscation and penalty1. If any person, takes or utilises CENVAT credit in respect of input or capital goods or input services, wrongly or in contravention of any of the

provisions of these rules, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty

or service tax on such goods or services, as the case may be, or 2000/- Rs., whichever is greater.

2. In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud,

collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made

there under with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of

section 11AC of the Excise Act.

3. In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud,

collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of

the rules made there under with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty

in terms of the provisions of section 78 of the Finance Act.

4. Any order under sub-rule (1), sub-rule (2) or sub-rule (3) shall be issued by the Central Excise Officer following the principles of natural justice.

Rule 15A:- General penalty



Whoever contravenes the provisions of these rules for which no penalty has been provided in the rules, he shall be liable to a penalty which may

extend to Rs.5000/-

RULE 16:- Supplementary provision1. Any notification, circular, instruction, standing order, trade notice or other order issued under the CENVAT Credit Rules, 2002 or the Service

Tax Credit Rules, 2002, by the Central Government, the Central Board of Excise and Customs, the Chief Commissioner of Central Excise or the

Commissioner of Central Excise, and in force at the commencement of these rules, shall, to the extent it is relevant and consistent with these

rules, be deemed to be valid and issued under the corresponding provisions of these rules.

2. References in any rule, notification, circular, instruction, standing order, trade notice or other order to the CENVAT Credit Rules, 2002 and any

provision thereof or, as the case may be, the Service Tax Credit Rules, 2002 and any provision thereof shall, on the commencement of these

rules, be construed as references to the CENVAT Credit Rules, 2004 and any corresponding provision thereof.

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